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World Development Report 1998/99: Knowledge for Development

New York, NY: Oxford University Press, 1998. 264 pages. $49.95 hardcover, $25.95 softcover.

Recognizing that access to information is vital for success in the modern world, the 21st World Bank World Development Report focuses on the information gap between developed and developing countries, as well as on the gap between the elite and the poor within countries. Drawing on examples from a variety of sectors, including agriculture, education, and finance, the study shows the negative effects of the information gap, as well as the benefits reaped from narrowing the disparity. While the report does not focus on China specifically, it does examine the success of East Asian countries in acquiring, absorbing, and communicating knowledge, as well as their failure to address information problems, particularly in their financial systems. Part I focuses on closing technology gaps between and within countries. To acquire knowledge, countries must adapt it through trade, foreign investment, and licensing agreements, as well as create it through research and development. Part II focuses on addressing information problems related to the natural environment and within financial systems, and how such problems in these areas hurt the poorest of a country's population. Using examples ranging from sharecropping in India to the Russian banking system, the authors show how information problems affect different levels and sectors of society across the globe. Part III explores what actions governments and institutions can take to facilitate information flows. In conclusion, the authors refute the popular belief that free markets will naturally solve information problems and close knowledge gaps. The Asian crisis certainly has demonstrated this. Government has an important role to play, especially in promoting education and R&D, implementing policies and regulations to ensure transparency in financial systems, preserving the environment, and developing strong legal structures, all of which will improve information flows, boost economic development, and help eradicate poverty. Sidebars, charts, and graphs providing examples of ideas discussed in the text are sprinkled liberally throughout the volume. At the back of the book, readers can find selected development indicators for more than 130 countries. These include basic socioeconomic data such as population, life expectancy, GNP, and land area. While this volume is aimed primarily at government officials, businesspeople may find some of the ideas and information contained in charts and tables relevant to their overseas operations.

-Virginia A. Hulme
Virginia A. Hulme is assistant editor of The CBR.

Creating and Enforcing Security in the PRC: Practical Strategies

Edited by Ian A. Tokley. Hong Kong, Asia Law & Practice, 1997. 246 pp. $260 softcover.

International banks and financial institutions lending in foreign currency to domestic enterprises or Sino-foreign joint ventures in China face a number of hurdles in creating and enforcing security for their loans. While the rapidly evolving legal framework for the financing of transactions in the PRC may eventually result in a transparent, sophisticated body of law that adheres to international standards, the current reality falls short of this ideal. Creating & Enforcing Security in the PRC: Practical Strategies provides an overview of how the current laws governing various forms of security in China operate, identifying key problem areas and recommending strategies for legal counsel of lending institutions. The contributors to the book are leading practitioners in the field of investment and finance in China. The first section of the book identifies and explains the common types of security legally recognized in the PRC. Securing a loan in foreign currency over assets located in China requires an accurate assessment of the borrower's ability to repay the loan in foreign currency, compliance with sometimes contradictory national- and local-level laws and regulations, and an understanding of how to enforce the obligation if necessary. The book's second section deals with less common types of security, while the third part provides additional analysis and strategies for two major business areas that use secured financing in China, project finance and trade finance. The fourth and final section examines due diligence issues faced by international lenders in the Chinese business environment. Appendices contain a table of securities-related and other legislation, including a complete English translation of the PRC Security Law of 1995. Creating and Enforcing Security in the PRC: Practical Strategies is conveniently structured for quick reference by legal practitioners. The highlighted checklists at the end of each chapter, which provide a step-by-step strategy for minimizing risks, are especially helpful. Though the book is an introductory guide, identifying major issues and recommending strategies without going into great detail, it is an excellent resource for legal practitioners involved in international lending to China, and may also be useful to counsel for potential borrowers in the PRC.

-Eric Rhodes
Eric Rhodes is a third-year law student at the University of North Carolina School of Law and a former research assistant at The US-China Business Council.

China to 2010

by Georgina Wilde. London: The Economist Intelligence Unit, 1998. 124 pp. $625 softcover.

In China to 2010, Georgina Wilde offers insights into China's future that many businesses could apply to their China operations. After a thorough introduction to China's current political, economic, and social systems, she posits two scenarios for the future based on the speed of the country's overall reforms. Perhaps as useful to business planners as her plausible portrayal of what might occur in the next decade or so are the abundance of useful tables, figures, and boxes that supplement the main text. Wilde sets the backdrop for her forecasts with a detailed analysis of present-day China. In the chapter on the economy, for example, the author outlines the beginnings of China's reform efforts and the stages of growth; provides sectoral briefs; and compares China's experiences to those of other countries. The chapter on China's growth agenda summarizes, among other issues, efforts to reform the bureaucracy without diminishing central-government authority. Wilde maintains that continued reforms are guaranteed, though the pace of such reforms is unknown. Three possible sources of pressure could direct the PRC leadership into a cautious reform scenario: opposition from state employees, provincial resistance to the central government, and factional struggle s within the leadership. Under rapid reform, unemployment would climb dramatically, to roughly 40 million workers by 2000, remaining controls on the capital account would be lifted, state banks would increasingly lend on commercial terms, and monetary policy would be based on interest rates rather than administrative policy. This scenario also includes an accelerated opening of China's services sector and China's entry into the World Trade Organization within three years. Under Wilde's more cautious, second scenario, industrial reforms would proceed at a slower pace than what was announced in March 1998, and restructuring of the state and financial sectors would be gradual. Funds for investment that otherwise would be invested in infrastructure would be diverted to state enterprises. Moreover, bank reform would be put on hold, prolonging the tendency to lend on the basis of local government orders, and the leadership may resort to administrative curbs on inflation and credit. Reform would proceed faster in coastal areas than in the interior. Such a scenario would widen inequalities, thus heightening social tensions in the long run at the expense of short-term stability. Though many analysts urge a rapid approach to solving China's economic problems, Wilde notes at least two sources of potential pressure on Beijing--from state employees and provincial leaders--that seem to be mounting already. Indeed, PRC policy moves taken in late 1998 suggest that China is on the path of slower reform.

-Darlene M. Liao
Darlene M. Liao is assistant editor of The CBR.

Negotiating China: Case Studies and Strategies

by Carolyn Blackman. St. Leonards, Australia, Allen & Unwin, 1997. 224 pages, AUS$24.95 softcover.

Do the Chinese have a unique negotiating style? In Negotiating China, Carolyn Blackman lays out carefully just how differently the Chinese negotiate vis-a-vis their Western counterparts. The book asserts, with reason, that better understanding these differences allows Western businesses to negotiate more effectively in China. After a review of other analyses of Chinese negotiations, the book goes on to provide a helpful roadmap of a typical bargaining process. This section highlights the fact that in China, preparing for a discussion and the "post-negotiation period" are as important as formal talks. Blackman also discusses traditional Chinese tactics, such as playing off one firm against its competitors and changing negotiators or the location of talks mid-stream. The strongest part of the book is the third and final section, in which Blackman presents six case studies and analyzes why each failed or succeeded. This book offers useful perspectives and pointers for US businesses. Perhaps the most important is that a company should take its time during the negotiation process , and not fall victim to false deadlines that Chinese negotiators may impose to push a foreign firm to agree to their agenda. Because Chinese negotiators tend to move forward only toward the end of the negotiation period, Blackman suggests that companies plan to make concessions at a late stage or under deadline. The author stresses the importance of relying on third parties to ascertain the potential causes for, and solutions to, a deadlock. The book also does a good job of explaining the constraints on Chinese negotiators. For example, the Chinese are often unable to respond spontaneously to unanticipated developments in the negotiation process because negotiators often do not have decisionmaking authority. But Blackman also could have compared these constraints with those facing US negotiators, who often must meet their headquarters' objectives while attempting to remain flexible at the negotiating table. There are limits to any analysis of a national mindset, as such generalizations risk oversimplification. It is possible, for example, that Americans, Australians, Europeans, and Asians from developed nations each approach negotiations differently. While Negotiating China makes an important contribution to the field, ultimately the book observes China only through Western eyes. An interesting topic for future analysis would be examining how Chinese view Western negotiating styles. Finally, no matter how useful the guidebook to cultural sensitivity, or how well prepared a foreign firm's negotiating team may be, neither side should forget that obstacles may not be differences in approach, but fundamental differences in objectives.

-Karen M. Sutter
Karen M. Sutter is director of Business Advisory Services in The US-China Business Council's Washington, DC office.

Last Updated: 30-Dec-98